US GDP
Demographics and US GDP growth
Credit Suisse’s global demographics research team came out with a new note on Friday featuring some enlightening charts about the US economy. It provides a handy way of evaluating the country’s lackluster performance since 2000, as well as a few longer-term trends. As the CS team notes, GDP growth can be decomposed into three distinct forces: growth in the population of working-age people, growth in the number of hours worked by each working-aged person, and productivity growth.
The (early) Lunch Wrap
Ukraine, Georgia and Moldova agree closer ties with EU || Italy leads calls to slow sanctions against Russia || Merkel to limit Juncker fallout || Berlin drops Verizon over US spying fears || Banks start to drain Barclays dark pool || NYSE has won the coveted listing of Alibaba || The World Bank has issued its first ever catastrophe bond || Wall Street banks create corporate bond trading platform || GoPro Shares Jump 31% in Debut || American Apparel faces loan repayment || Markets
Oh the thinks you can think
Bank of America Merrill Lynch strategist Michael Hartnett has offered a call to arms to thematic thinkers everywhere. Invoking Dr Seuss he, well, judge for yourself: In the next 40 years, the world will run out of oil. In the next 10 years, a laptop will communicate faster than a human brain. In the next 10 days, 112,000 people will retire in the US, Japan and Europe. Today, 56% of the world economy has zero interest rate policies. Tomorrow, there will be over 3.3 billion searches on Google. And in the next 10 seconds, the US national debt will rise by $322,000. Cyclical and secular trends are transforming at a fast and meaningful pace.
The 6am London Cut
Markets: Asian markets were under pressure in the face of fresh tension in Ukraine and after the S&P 500 dropped to a two-month low on Friday. However, action was muted as investors waited for key Asian data later in the week, including China GDP figures on Wednesday. The US earnings season also ramps up, with about 10 per cent of S&P 500 companies set to report this week. (FT’s Global Markets Overview)
Killing a chart, but not the margin question
The pseudonymous Jesse Livermore returns to his mission of demolishing favourite bear arguments, hollow reasoning he thinks has served too long as an excuse to avoid investing. The latest forray is on the subject of US margins, which for the last decade appear to have been much higher than during the half century that preceded it. Inevitable reversion to the mean, means corporate profitability must (one day) fall, say the pessimists.
The capex call
Like other parts of the US economic recovery — housing, the labour market — capital expenditures by companies have been a letdown recently, even accounting for the weather. The latest example came in Wednesday’s durable goods report, in which the “nondefense capital goods orders excluding aircraft” component fell. (That figure is a proxy and obviously doesn’t capture everything that normally counts as capex, which also includes investment in property and structures, imported capital goods, and certain intangible assets. Capex is often poorly or loosely defined in discussions about it.)
Inflated worries, part 1 — an overview of US inflation pressures
Here’s a rough sketch of the variables influencing US inflation, which has been remarkably low for two years running: 1) The remaining labour market slack, including a staggering and resilient long-term unemployment problem. The amount of slack remains tough to know given the difficulty of measuring the cyclical vs secular components of the fall in the labour force participation rate. Much more on this later. 2) The output gap. This isn’t a well-defined idea, we know, but few people would argue that the US economy is producing at potential. The US economic recovery does appear to have accelerated in the final two quarters of last year (the December jobs report notwithstanding), and the conditions for growth look better than they have in years. If the nascent acceleration proves sustainable, then the labour market may well tighten up and push wages higher. Obviously this is related to the first point about labour market slack, and plenty of caveats are needed given the head-fakes of the last four winters.
The (early) Lunch Wrap
Too early to declare crisis over, says Draghi || Congress push on fast-track authority boosts trade deal hopes || China becomes world’s biggest trader in goods || Alcoa admits links to corrupt international underworld || NY probes banks over early warnings tips to select fund managers || Spain’s Bankia returns to capital markets || Goldman-owned miner Colombian National Resources halts coal exports || Apollo Global Management closes flagship fund || EU antitrust regulators clear $35bn merger of Omnicomand Publicis || Markets
The real fissure
Alexander Friedman, global chief investment officer of UBS AG, and his colleague Kiran Ganesh, cross asset strategist at UBS Wealth Management, share their thoughts on the core issues behind the Washington impasse. For reference, Friedman is American and oversees $1.7 trillion in managed assets… ————–
The 6am Cut London
Asian markets mixed, HK closed due to typhoon || ‘Whale’ charges could be laid today || UK gilts reach 2-year high || UK unemployment today || BP sues US govt over new contract ban || Icahn pushes for bigger Apple buyback || China pressing ahead to cut industrial capacity || Whirlpool buys majority stake in Hefei Rongshida || Corporate profits and forecasts move in opposite directions
Those US GDP revisions…
This is what $560bn or so of newly-discovered US economic output looks like. Yes it’s the latest BEA estimates/revisions of US GDP. They’re out – and with 1.7 per cent growth in 2013′s second quarter, and 2012 growth revised up to 2.8 per cent from 2.2 per cent at the last estimate, they’re fairly good.
A guide to the conceptual US GDP changes
The BEA’s comprehensive benchmark revisions to the national income and product accounts will be released later today, and they’ll include the major conceptual changes announced earlier this year. If you want a straightforward summary of the changes and how they matter, we recommend Robin Harding’s piece from Monday. (And remember that the annual benchmark revisions, also to be released today, will affect numbers going back to 2010. Look for GDP and GDI, which had diverged markedly in the year through the end of Q1, to be revised towards each other.)
The 6am Cut London
Japanese stocks fall || Publicis-Omnicom $35bn tie-up || European oil demand rises after 2 years || Siemens prepares to remove CEO || SFO to receive £2m special funding for Barclays || China to stop investigating Europe’s wine and polysilicon exports || Rio sells copper mine stake for $820m to China Molybdenum || Yellen has the best Fed forecasting record
Some observations and oddities in China’s Q2 GDP
A few thoughts on China’s second-quarter GDP, which came in at 7.5 per cent, in line with expectations: - The seasonally-adjusted rate is 1.7 per cent. If annualised — ie the way that most countries present their quarterly GDP data — is it just under 7 per cent.
USAA+, stable
Clearly, the planet — on tenterhooks since S&P cut the world’s biggest AAA-rated credit two years ago — can breathe easily once more. This is the key bit of why Standard & Poor’s put its rating for the United States of America on a stable outlook again (they also don’t see a repeat of the debt ceiling threatening debt service this year):